4. Selecting right financial securities is not easy

5. Cost management not proportional to performance

Mutual fund managers are one of the highest-paid executives in the finance domain. Furthermore, the fee paid to the Asset Management Company (AMC) is no way related to the performance of these funds.

6. Unethical practices may creep in

Mutual fund managers may follow unethical (corrupt) practices to boost the performance of the various fund-related schemes.

7. 12b-1 fees

Hidden fees are popularly known as '12b-1 fees'. It is basically a sum of annual distribution fees or marketing fees. The 12b-1 fee derives its name from a section in the Investment Company Act of 1940, United States.

12b-1 fees are disclosed in the mutual fund prospectus and can also be found on the official website of such issuer organization.

Conclusion

There would be certain disadvantages of investing in almost all investment-prospects. However, in case of mutual funds, the risk of disadvantages can be mitigated (reduced) by preparing a list of its limitations.

Once such a list is prepared, then each item (disadvantage) in the list shall be scrutinized and determined to decide whether it applies as a disadvantage of mutual fund or to a particular scheme of it.